IN-DEPTH: Parking deal offers less cash up front

City's proposal chooses lower rates, shorter hours

Feb. 24, 2013

City Manager Milton Dohoney Jr. has recommended that City Council accept a $92 million deal for its parking rights that also would provide $3 million a year for the next 30 years. / The Enquirer/Leigh Taylor

Written by

Barry M. Horstman

When a city is looking at projected deficits of $20 million-plus in each of the next two years, it’s difficult to leave more than $50 million on the negotiating table in a deal to lease most of its street parking meters and lots.

But that’s what top Cincinnati City Hall officials are proposing to do, sacrificing a bigger upfront payment as a tradeoff to keep future parking rates lower and hours of enforcement shorter than they might have been had the city grabbed the fattest check available.

Although bidders offered initial payments of as much as $150 million, City Manager Milton Dohoney Jr. has recommended that City Council accept a $92 million deal that also would provide $3 million a year for the next 30 years.

Dohoney has proposed directing the $92 million to a handful of high-profile projects and budget priorities. Inside and outside City Hall, however, two major questions are being asked: Is there any guarantee that council will spend the $92 million that way? And should the city even be in a rush to commit the dollars in any fashion?

“Rare is the day when a city gets a $92 million cash infusion,” said Councilman P.G. Sittenfeld. “I don’t think spending it as fast as possible is the approach we ought to take.”

The $92 million figure could have been much higher.

But from the outset, city leaders realized that the parking lease was driven by a mathematical/political equation in which less could be more. Tempting as the prospect of an additional tens of millions of dollars might be, in this case, the most money today arguably could produce the worst deal for the city in the long term.

“The city manager directed us to leave some of the money on the table in exchange for some things important to the public,” said Dohoney spokeswoman Meg Olberding.

Free Sunday and holiday parking, the first 10 minutes of parking free Downtown for those with quick stops at offices or stores, initial $2-an-hour rates Downtown – these and other current policies almost certainly would have disappeared had the city selected a bidder needing to recoup far more than the $92 million offered by a team led by the Port of Greater Cincinnati Development Authority.

The proposed deal will expand the present 9 a.m. to 5 p.m. meter hours to 8 a.m. to 9 p.m. Downtown and to 7 a.m. to 9 p.m. in neighborhoods, where enforcement hours now generally run from 7 a.m. to 6 p.m.

But if City Hall had gone for one of the bigger initial checks, most believe the enforcement hours would have approached 24/7.

“You obviously want as much as you can get initially, but you also have to be reasonable and look at the future impact,” said Councilwoman Roxanne Qualls. “We promised we’d listen to the concerns, and those concerns about rates and hours and weekends shaped this proposal.”

Parking-meter leases have had mixed results where tried

In moving to privatize most of its parking, Cincinnati is in the vanguard of a movement still in its infancy nationwide – and with a track record open to debate.

Two of the major cities to approve long-term leases of their parking meters, Chicago and Indianapolis, have had very different experiences.

Chicago, which in 2008 leased its meters under a 75-year deal for $1.15 billion, is widely viewed as the poster child of everything that can go wrong with such arrangements.

The money is long gone, having been quickly spent to fill budget holes and immediate needs, not on longer-term projects as many expected.

And parking rates in central Chicago have more than doubled, from $3 to $6.50, provoking an outcry heightened by a public report that concluded that the city got only half what the system was worth.

Early reviews have been more positive about Indianapolis’ 2010 deal, a 50-year lease of nearly 3,700 meters for which the city received an initial $20 million payment and could see up to $600 million through a revenue-sharing formula over the life of the lease.

In another parking deal that has drawn nationwide attention, Ohio State University last year leased nearly 36,000 spaces in its lots and garages for 50 years for $483 million.

The money, university officials say, will help offset declining state government support.

How to spend the money: Always plenty of demands

Assuming City Council approves Cincinnati’s deal, the debate will quickly shift to what happens to the $92 million. Dohoney hopes to immediately answer that question, perhaps in part because he has been a city manager long enough to realize the potential pitfalls of leaving $92 million tantalizingly unattached before council members who seldom suffer from a shortage of ideas on how to spend new money.

Under Dohoney’s plan, half of the money would help balance the city’s 2014 and 2015 budgets, offsetting projected deficits of $25.8 million and $20.9 million, respectively.

Another $20 million would be spent on the Interstate 71 and Martin Luther King Drive interchange, a project estimated to produce up to 7,300 new jobs and $33 million in additional revenue by enhancing access to the city center and Uptown neighborhoods such as Corryville.

Administration wants to make income, spending a package

Dohoney also has identified four other ways to use the money:

• $12 million to convert the Tower Place Mall into a parking structure with first-floor retail, and to tear down the Pogues Garage to make way for a high-rise residential tower, a grocery store and parking.

• $6.3 million to add to the city’s reserve, bringing money in that account to the 8 percent goal.

• $4 million for additions to Smale Riverfront Park, including a carousel and fountain.

• $3 million for a new bicycle trail through Evanston, Hyde Park, Mount Lookout and Oakley.

While those are only the city manager’s recommendations, his staff says that council approval of the parking plan will be considered as simultaneous endorsement of the spending priorities.

“If they approve the parking, this is a package deal,” Olberding said. “For the administration, if you approve the parking, you also approve spending the money that way. That’s the direction we’re seeking.”

Chances to 'tweak' the plan, but questions about the details

Qualls said while she generally supports Dohoney’s “very common sense” proposals, “there can be opportunities to tweak them” in the future.

But with some of the projects on Dohoney’s list already “teed up and ready to go,” Qualls stressed that much of the money from the parking deal could be committed relatively quickly.

Sittenfeld questions whether that is a good thing.

“The notion of quickly spending or committing $92 million bothers me,” he said. “They’ve dangled a whole lot of candy in front of us and now they want us to rush ahead on this. To me, it makes sense to catch our breath and carefully think this through.”

A related worry, Sittenfeld said, is whether the city is so dazzled by the $92 million as to perhaps focus insufficiently on the deal’s potential downside.

He wants specific contractual details on how, among other things, future parking rates will be set and what happens if there is a problem with the bonds that will finance the deal.

“There’s a lot we still don’t know about this, but here’s what I do know,” Sittenfeld said. “To date, we’ve been given the rosy, cheery, optimistic version about how things could go.

“But we’re dealing with New York investment banks with nearly $200 billion behind them. And $200 billion New York investment banks are very good at getting their money back. So we’d better be prepared for anything.”